Introduction to Female Angel Investing | Rose Vitale| Female Angel Investor

Introduction to Female Angel Investing

Female Angel Investing Overview

What is a female angel investor?

The term “angel investor” originated in the early 1900s -referred to wealthy investors who invested in Broadway theatrical productions. Today, the term typically refers to high-net worth individuals or accredited investors* that invest in early-stage, private companies .

*SEC accredited investor definition –net worth of $1M excluding primary residence or income of $200k ($300k with spouse)

Who Is The Typical Angel?

Vary in background, Level of investment expertise, Professional Experience
Accredited investors –high net worth or income
$200K single, $300K married, or $1M net-worth (less primary residence)
Able to invest their own money into debt or equity deals

What Type of Company Might Female Angels Invest In?

  • Company is not sufficiently developed to stand on its own –still burning cash & not profitable.
  • Novel business concept often associated with an emerging market.
  • Products may be new and/or under development & still subject to technical & market risks.
  • The business may need both additional funding & mentoring to grow to the next stage of development.

What Do Angels Want in an Investment?

  • Typically seed or early stage companies
  • Large market opportunity with scaleable growth
  • Compelling strategy for gaining market share
  • Proprietary technology or other barriers to entry
  • Strong management team open to coaching
  • Opportunities they can identify with/understand
  • Reasonable Valuation & Credible exit strategy
  • Exceptional opportunities for high return on investment

Why Become an Female Angel Investor?

  • Stay engaged –using skills & experiences to help build a business
  • An active form of investing –not just watching the markets
  • An interest in mentoring the next generation of high impact entrepreneurs -create jobs & wealth
  • Motivation can be both financial and/or altruistic
  • Return on investment motivates all investors

How Venture Capital Differs From Female Angels

  • Venture capital firms are professional managers of risk capital
  • Typical investors are endowments, foundations, ultra high net worth persons, insurance companies, etc.
  • VCs invest as a fund vs. investing individually
  • The average venture capital fund: $135M
  • Often look to invest $5-$8M in a given company

Female Angel Investing -Part of Alternative Assets

Most wealth managers believe “alternative investments” are a necessary part of any healthy portfolio allocation plan

The alternatives category includes:
Real Estate
Commodities
Hedge Funds
Private equity

Angel investing is a form of private equity

Angel Investor Return Targets

  • Many angels target 10X ROI (cash-on-cash) or more
  • Typical timeframe of 5 to 7 years
  • Annualized rate of return between 40% & 60%
  • Require higher returns because of high risk

Some Truths About Angel Investing

  • Smart investors are aware of their inability to pick only winners
  • Investing in startups is a numbers game as most startups fail
  • In general, out of 10 companies: 2 wildly succeed, 4 die slowly, 4 die violent deaths
  • Successful companies will need follow-on investment
    Source: Angel Investing –David S. Rose

Determining Your Return As a Female Angel Investor

How much money you make from angel investing is determined in large part by:
• Value of the company when you invest
• Terms of the deal
• Value of the company when you sell
• Number of years it takes to sell
• It is estimated that 40% or more of deals fail to secure funding due to a failure to agree on valuation

Source: Angel Investing –David S. Rose

What Many Individual Female Angels Do

  • Go out and find a company of interest
  • Invest in unvetted deals with too high valuations
  • Write a check (sometimes a really big check)
  • Don’t reserve follow on capital
  • Invest in too few deals
  • Invest without a long-term mindset
  • Quit investing in the category after losing money

The Better Female Angel Investing Model

  • Join an angel group -Work together to find promising companies
  • Camaraderie and shared ideas/Consistent Deal Flow
  • Conduct or have access to thorough due diligence
  • Syndicate with other female angel groups – deeper pockets
  • Get involved with the company post-investment

How Does a Female Angel Network Operate?

  • Meet regularly to review investment opportunities
  • Invest individually or through a pool or fund
  • Provide capital in the $250K-$400K range

Nina Salvaggio
Director of Angel Investments | Venture Advisor
Female Angel Investors Network
Email: membership@femaleangelinvestor.com
Web Site: www.FemaleAngelInvestor.com

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